On the Nuclear Power Plant
Translated from Russian with the help of AI. Original: Russian version
A financial analysis of the proposed nuclear power plant in Kazakhstan: its cost, tariffs, timeline and risks, and a comparison with the failed Balkhash thermal power plant project.
Heated debate is under way over a nuclear power plant (NPP) in Kazakhstan. The positions of the Ministry of Energy and the other participants in the discussion are already clear, but it is still worth looking at such a plant from a financial point of view.
Kazakhstan has already had a bitter experience of building a large power plant. If you remember, I am talking about the coal-fired Balkhash thermal power plant (TPP), which was supposed to solve the problem of electricity shortages. We mine a lot of coal ourselves, and coal-fired power is one of the cheapest sources of energy for us. The project began in 2008. Korea's Samsung was brought in as a partner and a long-term contract was signed. Construction had seemingly begun: part of the equipment had been delivered and the site prepared. Then, in 2015, came the problem of devaluation. What was to be done? The Koreans needed their price in dollars, while our side dug in on tenge. The Koreans waited and waited, and never got a decision from the government of the day. That was plainly a very short-sighted failure to act on Kazakhstan's part. In the end the project was cancelled, Samsung was paid huge penalties and had all its investment returned, and Kazakhstan was left without the electricity. It was an enormous mistake: had the Balkhash TPP been completed then, the question of a nuclear plant would not be on the table now.
But what's done is done, so now to the NPP. I am not a great expert on technology, and I am sure that safety is a solvable problem, given advances in technology and accumulated experience. What worries me more is the financial side. A four-reactor, 4.8 gigawatt plant will cost USD 25-30 billion. That seems to be the capacity they want. Take Turkey's Akkuyu NPP: from signing to completion of construction, it took Turkey 15 years. The project cost Turkey USD 22 billion. Allowing for inflation, for us it will come to USD 25-30 billion. In Turkey, Rosatom will operate the plant itself and has agreed on a tariff that Rosatom considers low, 12 cents, which is 58 tenge per kilowatt-hour. I don't think ours will be cheaper; most likely it will be more expensive. Who in Kazakhstan will want to buy electricity at 58 tenge? That is a rhetorical question.
Finding USD 25 billion ourselves, even spread over 15 years, will be problematic, given our budget problems and the fact that the National Fund has not been growing for the past several years. Most likely there will be a loan from the country that builds the plant. There are not many such countries, and I think it will be Russia. But given sanctions, Russia is not the most reliable partner in this respect. There will be risks of undersupply of equipment that has a foreign component, and the project could drag on even longer.
If the decision on whether to build is made only this year, it will take another two years or so to choose a contractor. Then the feasibility study, project design and approvals will take at least three to four years. Then construction itself will take about 10-12 years. In total, I think it will realistically take 16-18 years, which means we would see the plant around 2040.
Given how our economy is developing, the tenge will certainly depreciate against the dollar over these 16-18 years. That means that at some stage the question of the electricity price in tenge may well arise, since we are a country with cheap electricity. This means the likelihood that we will be able to complete the plant at all is clearly not very high.
That is why I see no point in arguing about the NPP now. Our state apparatus will bury the question in bureaucracy and in the end shelve it in the nomenklatura, as happened with the Balkhash TPP, which was much cheaper and whose tariff was likewise acceptable compared with the cost of what we will be offered through the NPP.
And in general, all this talk of carbon neutrality is clearly not something we need yet. It will bring us neither stability nor profit, and given that we have our own coal and gas, it is better to concentrate on those fuels and think about how to build coal- and gas-fired plants.